Embedding reports into the email body seems to only work under certain circumstances. What are the limitaions and under what conditions will it work?
The limitation is not edition based. It is export type based. Embedded reports will only work for text based outputs like csv, txt, html, tab separated and xml. If you change your report output type to one of the above, the option will be re-enabled, and you can tick it. It also can only be done if you are using SMTP and is not yet possible for MAPI. Finally, make sure that the report destination is definitely set to email.